x |
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended April 30, 2010
|
|
o |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period
from to
|
Nevada
|
84-1273503
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
No.
218, Taiping
Taiping
District, Harbin, Heilongjiang Province, P.R. China 100016
(Address
of principal executive offices)
|
|
Large accelerated
filer
o
|
Accelerated filer
o
|
Non-accelerated
filer
o
(Do not
check if a smaller reporting company)
|
Smaller reporting
company
x
|
Condensed
Consolidated Balance Sheets as of April 30, 2010 (unaudited) and October
31, 2009
(audited)
|
||||
Condensed
Consolidated Statements of Operations and Comprehensive Income for the
Three and Six
Months
Ended April 30, 2010 and 2009 (unaudited)
|
||||
Condensed
Consolidated Statements of Cash Flows for the Six Months Ended April 30,
2010
and
2009 (unaudited)
|
||||
Notes
to the Condensed Consolidated Financial Statements
(unaudited)
|
||||
Signature Page |
Note
|
April 30,
2010
|
October 31,
2009
|
|||||||
US$
|
US$
|
||||||||
ASSETS
|
(Unaudited)
|
(Audited)
|
|||||||
Current
assets:
|
|||||||||
Cash
and cash equivalents
|
23,391,609
|
8,111,514
|
|||||||
Trade
receivables, net
|
7
|
14,900,545
|
23,203,410
|
||||||
Due
from related parties
|
11
|
-
|
130,199
|
||||||
Inventory,
net
|
9
|
2,934,928
|
3,024,016
|
||||||
Deposits
|
11
|
1,462,887
|
-
|
||||||
Prepayments
|
-
|
89,281
|
|||||||
Other
receivables, net
|
8
|
164,566
|
102,613
|
||||||
Total
current assets
|
42,854,535
|
34,661,033
|
|||||||
Property
and equipment, net
|
10
|
2,164,720
|
2,352,163
|
||||||
Deposits
|
11
|
18,557,480
|
16,137,000
|
||||||
Total
assets
|
63,576,735
|
53,150,196
|
|||||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||||||||
Liabilities
|
|||||||||
Current
liabilities:
|
|||||||||
Accounts
payable
|
279,063
|
369,329
|
|||||||
Value
added tax payable
|
498,090
|
1,186,642
|
|||||||
Accrued
employee benefits
|
1,339,371
|
1,136,267
|
|||||||
Warrant
liability
|
342,770
|
-
|
|||||||
Total
current liabilities
|
2,459,294
|
2,692,238
|
|||||||
Commitments
and Contingencies
|
16
|
||||||||
Shareholders’
equity
|
|||||||||
Preferred
stock (no par value, 1,000,000 shares authorized; none issued and
outstanding as of April 30, 2010 and October 31, 2009)
|
14
|
-
|
-
|
||||||
Common
stock ($0.001 par value, 100,000,000 shares
authorized;
37,239,536 issued and
outstanding
as of April 30, 2010 and October 31, 2009)
|
14
|
37,240
|
37,240
|
||||||
Additional
paid-in capital
|
7,613,119
|
7,596,525
|
|||||||
Common
stock warrants
|
15
|
496,732
|
496,732
|
||||||
Reserves
|
16
|
3,372,697
|
3,372,697
|
||||||
Accumulated
other comprehensive income
|
3,207,770
|
3,367,659
|
|||||||
Retained
earnings
|
46,389,883
|
35,587,105
|
|||||||
Total
shareholders’ equity
|
61,117,441
|
50,457,958
|
|||||||
Total
liabilities and shareholders’ equity
|
63,576,735
|
53,150,196
|
Three
months ended
April
30,
|
Six
months ended
April
30,
|
|||||||||||||||||||
Note
|
2010
|
2009
|
2010
|
2009
|
||||||||||||||||
US$
|
US$
|
US$
|
US$
|
|||||||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||||
Sales,
net
|
12,092,506 | 8,702,878 | 29,225,120 | 22,472,875 | ||||||||||||||||
Cost
of goods sold
|
(5,877,856 | ) | (4,402,550 | ) | (13,530,494 | ) | (10,883,043 | ) | ||||||||||||
Gross
profit
|
6,214,650 | 4,300,328 | 15,694,626 | 11,589,832 | ||||||||||||||||
Operating
and administrative expenses:
|
||||||||||||||||||||
Sales
and marketing
|
1,265,319 | 1,119,855 | 2,404,300 | 1,417,945 | ||||||||||||||||
General
and administrative
|
974,825 | 597,740 | 1,791,794 | 1,219,773 | ||||||||||||||||
Research
and development
|
570,557 | 494,202 | 722,921 | 605,980 | ||||||||||||||||
Total
operating expenses
|
2,810,701 | 2,211,797 | 4,919,015 | 3,243,698 | ||||||||||||||||
Income
from operations
|
3,403,949 | 2,088,531 | 10,775,611 | 8,346,134 | ||||||||||||||||
Other
income:
|
||||||||||||||||||||
Interest
income
|
15,699 | 10,022 | 27,166 | 19,150 | ||||||||||||||||
Income
from operations before income tax expenses
|
3,419,648 | 2,098,553 | 10,802,777 | 8,365,284 | ||||||||||||||||
Income
tax expenses
|
5 | - | - | - | - | |||||||||||||||
Net
income
|
3,419,648 | 2,098,553 | 10,802,777 | 8,365,284 | ||||||||||||||||
Other
comprehensive income:
|
||||||||||||||||||||
Cumulative
currency translation adjustments
|
(162,404 | ) | 79,271 | (159,889 | ) | 14,168 | ||||||||||||||
Total
comprehensive income
|
3,257,244 | 2,177,824 | 10,642,888 | 8,379,452 | ||||||||||||||||
Earnings
per common stock- Basic
|
0.09 | 0.06 | 0.29 | 0.24 | ||||||||||||||||
Earnings
per common stock - Diluted
|
0.09 | 0.06 | 0.29 | 0.24 | ||||||||||||||||
Weighted
average common stock outstanding
|
||||||||||||||||||||
Basic
|
37,239,536 | 35,096,680 | 37,239,536 | 35,096,680 | ||||||||||||||||
Diluted
|
37,917,140 | 35,096,680 | 37,724,214 | 35,096,680 |
For
the six months ended
April
30,
|
||||||||
2010
|
2009
|
|||||||
US$
|
US$
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
10,802,777
|
8,365,284
|
||||||
Adjustments
to reconcile net income to operating activities:
|
||||||||
Depreciation
of property and equipment
|
181,076
|
177,224
|
||||||
Warrants
issued for services
|
342,770
|
-
|
||||||
Share
compensation
|
16,594
|
-
|
||||||
Changes
in assets and liabilities:
|
||||||||
Decrease
(increase) in trade receivables
|
8,238,225
|
(4,458,764
|
)
|
|||||
Decrease
(increase) in due from related parties
|
129,841
|
(448,118
|
)
|
|||||
Decrease
in inventory, net
|
80,613
|
569,231
|
||||||
Decrease
in prepayments
|
89,036
|
33,659
|
||||||
(Increase)
decrease in other receivables, net
|
(62,244)
|
80,803
|
||||||
Decrease
in accounts payable
|
(89,235)
|
(77,331)
|
||||||
Decrease
in value added tax payable
|
(685,259)
|
(270,979
|
)
|
|||||
Increase
in accrued employee benefits
|
206,296
|
216,565
|
||||||
Net
cash provided by operating activities
|
19,250,490
|
4,187,574
|
||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of property and equipment
|
-
|
(16,212
|
)
|
|||||
Deposits
for office properties
|
(3,928,614)
|
-
|
||||||
Net
cash used in investing activities
|
(3,928,614)
|
(16,212
|
)
|
|||||
Effect
of exchange rate changes on cash
|
(41,781)
|
6,215
|
||||||
Net
increase in cash and cash equivalents
|
15,280,095
|
4,177,577
|
||||||
Cash
and cash equivalents, beginning of year
|
8,111,514
|
9,747,693
|
||||||
Cash
and cash equivalents, end of year
|
23,391,609
|
13,925,270
|
||||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid during the year for income taxes
|
-
|
-
|
||||||
Interest
paid during the year
|
-
|
-
|
June
1997
|
ComTech
Consolidation Group, Inc
|
February
1999
|
E-Net
Corporation
|
May
1999
|
E-Net
Financial Corporation
|
January
2000
|
E-Net.Com
Corporation
|
February
2000
|
E-Net
Financial.Com Corporation
|
January
2002
|
Anza
Capital, Inc (“Anza”)
|
June
2006
|
Renhuang
Pharmaceuticals, Inc.
|
·
|
Harbin
Renhuang Pharmaceutical Company Limited – Investment
holding.
|
·
|
Renhuang
China – Development, manufacturing and distribution of pharmaceutical
products.
|
Machinery
and equipment
|
10
years
|
Office
equipment and furnishings
|
5-10
years
|
Motor
vehicles
|
5-10
years
|
·
|
The
holder of the Warrants (the “Holder”) is entitled to the benefits of Rule
144 promulgated under the Securities Act of 1933, as amended and any other
rule or regulation of the SEC that may at any time permit the Holder to
sell securities of the Company to the public without
registration. Non compliance with such rules and regulations
could result in the Company having to settle the Warrant obligation in
cash.
|
·
|
The
exercise price and number of shares issuable upon exercise of the Warrants
(the “Warrant Shares”) are subject to adjustment for standard dilutive
events, including the issuance of common stock, or securities convertible
into or exercisable for shares of common stock, that will adversely affect
the Holder’s rights under the Warrants. There were no dilutive
events in the three and six months ended April 31, 2010, which would have
resulted in an adjustment to the exercise price or number of Warrant
Shares.
|
Expected volatility
|
205.3
|
%
|
||
Expected dividends
|
0
|
%
|
||
Expected term (in years)
|
3 years
|
|||
Risk-free rate
|
1.69
|
%
|
·
|
Level
1 – observable market inputs that are unadjusted quoted prices for
identical assets or liabilities in active
markets.
|
·
|
Level
2 – other significant observable inputs (including quoted prices for
similar securities, interest rates, credit risk,
etc…).
|
·
|
Level
3 – significant unobservable inputs (including the Company’s own
assumptions in determining the fair value of financial
instruments).
|
–
|
warrants,
|
–
|
employee
stock options, and
|
–
|
other
equity awards, which include long-term incentive
awards.
|
Three
months ended
April
30,
|
Six
months ended
April
30,
|
||||
2010
|
2009
|
2010
|
2009
|
||
US$
|
US$
|
US$
|
US$
|
||
Tax
savings
|
854,912
|
524,638
|
2,700,694
|
2,091,321
|
|
Benefit
per share:
|
|||||
Basic
|
0.02
|
0.01
|
0.07
|
0.06
|
|
Diluted
|
0.02
|
0.01
|
0.07
|
0.06
|
Three
months ended
April
30,
|
Six
months ended
April
30,
|
||||
2010
|
2009
|
2010
|
2009
|
||
US$
|
US$
|
US$
|
US$
|
||
Net
income before tax provision, as reported
|
3,419,648
|
2,098,553
|
10,802,777
|
8,365,284
|
|
Less
Tax savings
|
(854,912)
|
(524,638)
|
(2,700,694)
|
( 2,091,321)
|
|
Proforma
Net income
|
2,564,736
|
1,573,915
|
8,102,083
|
6,273,963
|
|
Proforma
Net income per share:
|
|||||
Basic
|
0.07
|
0.04
|
0.22
|
0.18
|
|
Diluted
|
0.07
|
0.04
|
0.21
|
0.18
|
Income
|
Shares
|
Per Share
|
||||||||||
(Numerator)
|
(Denominator)
|
Amount
|
||||||||||
US$
|
US$
|
|||||||||||
For
the three months ended April 30, 2010:
|
||||||||||||
Net
income
|
3,419,648
|
|||||||||||
Basic
EPS income available to common shareholders
|
3,419,648
|
37,239,536
|
0.09
|
|||||||||
Effect
of dilutive securities:
|
||||||||||||
Share
options
|
27,235
|
|||||||||||
Warrants
|
-
|
650,369
|
||||||||||
Diluted
EPS income available to common shareholders
|
3,419,648
|
37,917,140
|
0.09
|
|||||||||
For
the three months ended April 30, 2009:
|
||||||||||||
Net
income
|
2,098,553
|
|||||||||||
Basic
EPS income available to common shareholders
|
2,098,553
|
35,096,680
|
0.06
|
|||||||||
Effect
of dilutive securities:
|
||||||||||||
Share
options
|
-
|
-
|
||||||||||
Warrants
|
-
|
-
|
||||||||||
Diluted
EPS income available to common shareholders
|
2,098,553
|
35,096,680
|
0.06
|
Income
|
Shares
|
Per Share
|
||||||||||
(Numerator)
|
(Denominator)
|
Amount
|
||||||||||
US$
|
US$
|
|||||||||||
For
the six months ended April 30, 2010:
|
||||||||||||
Net
income
|
10,802,777
|
|||||||||||
Basic
EPS income available to common shareholders
|
10,802,777
|
37,239,536
|
0.29
|
|||||||||
Effect
of dilutive securities:
|
||||||||||||
Share
options
|
10,721
|
|||||||||||
Warrants
|
-
|
473,957
|
||||||||||
Diluted
EPS income available to common shareholders
|
10,802,777
|
37,724,214
|
0.29
|
|||||||||
For
the six months ended April 30, 2009:
|
||||||||||||
Net
income
|
8,365,284
|
|||||||||||
Basic
EPS income available to common shareholders
|
8,365,284
|
35,096,680
|
0.24
|
|||||||||
Effect
of dilutive securities:
|
||||||||||||
Share
options
|
-
|
-
|
||||||||||
Warrants
|
-
|
-
|
||||||||||
Diluted
EPS income available to common shareholders
|
8,365,284
|
35,096,680
|
0.24
|
2010
|
2009
|
|||||||
US$
|
US$
|
|||||||
Trade
receivables
|
16,749,583
|
26,667,816
|
||||||
Less:
Sales rebates
|
(1,406,774
|
)
|
(3,020,898
|
)
|
||||
Less:
Allowance for doubtful accounts
|
(442,264
|
)
|
(443,508
|
)
|
||||
Trade
receivables, net
|
14,900,545
|
23,203,410
|
2010
|
2009
|
|||||||
US$
|
US$
|
|||||||
Other
receivables
|
523,922
|
462,980
|
||||||
Less:
Allowance for doubtful accounts
|
(359,356
|
)
|
(360,367
|
)
|
||||
Other
receivables, net
|
164,566
|
102,613
|
2010
|
2009
|
|||||||
US$
|
US$
|
|||||||
Raw
materials
|
1,553,130
|
1,530,283
|
||||||
Work-in-progress
|
901,611
|
1,006,984
|
||||||
Finished
goods
|
544,241
|
550,982
|
||||||
Less: Inventory
reserves
|
(64,054
|
)
|
(64,233
|
)
|
||||
Inventory,
net
|
2,934,928
|
3,024,016
|
2010
|
2009
|
|||||||
US$
|
US$
|
|||||||
Machinery
and equipment
|
3,425,788
|
3,435,421
|
||||||
Office
equipment and furnishings
|
54,595
|
53,086
|
||||||
Motor
vehicles
|
52,937
|
54,749
|
||||||
3,533,320
|
3,543,256
|
|||||||
Less:
Accumulated depreciation
|
(1,368,600
|
)
|
(1,191,093
|
)
|
||||
Net
book value
|
2,164,720
|
2,352,163
|
11.
|
RELATED
PARTY TRANSACTIONS
|
2010
|
2009
|
|||||||
US$
|
US$
|
|||||||
Due
from related parties:
|
||||||||
Advances
(1)
|
-
|
130,199
|
||||||
Deposits
(2)
|
20,020,367
|
16,137,000
|
||||||
Total
|
20,020,367
|
16,267,199
|
Fair
value measurement
|
|||||||||||||
Quoted
prices in active markets of identical assets
(Level
1)
|
Significant
other observable inputs
(Level
2)
|
Significant
unobservable inputs
(Level
3)
|
|||||||||||
US$
|
US$
|
US$
|
|||||||||||
Warrants
liability
|
-
|
342,770
|
Expected volatility
|
227.9
|
%
|
||
Expected dividends
|
0
|
%
|
||
Expected term (in years)
|
3 years
|
|||
Risk-free rate
|
1.65
|
%
|
Expected volatility
|
236.5
|
%
|
||
Expected dividends
|
0
|
%
|
||
Expected term (in years)
|
3 years
|
|||
Risk-free rate
|
1.5
|
%
|
Options
|
Weighted average
granted date fair
value
|
||||
US$
|
|||||
Non-vested
at November 1, 2009
|
-
|
-
|
|||
Granted
|
120,000
|
1.91
|
|||
Vested
|
-
|
-
|
|||
Forfeited
or expired
|
-
|
-
|
|||
Non-vested
at April 30, 2010
|
120,000
|
1.91
|
Warrants
|
Average
exercise
price
|
|||||||
US$
|
||||||||
Outstanding
warrants at November 1, 2009
|
1,071,428
|
0.88
|
||||||
Warrants
granted
|
160,000
|
2.00
|
||||||
Exercised
|
-
|
-
|
||||||
Expired/cancelled
|
-
|
-
|
||||||
Outstanding
warrants at April 30, 2010
|
1,231,428
|
1.25
|
Warrants outstanding at
|
|||||||
April 30, 2010
|
|||||||
Weighted
|
Weighted
|
||||||
Average
|
Average
|
||||||
Remaining
|
Exercise
|
||||||
Exercise Prices
|
Warrants
|
Contractual
|
Price
|
||||
US$
|
Outstanding
|
Life (years)
|
US$
|
||||
0.88
|
1,071,428
|
||||||
2.00
|
160,000
|
||||||
1,231,428
|
2.16
|
1.02
|
2010
|
2009
|
|||||||
US$
|
US$
|
|||||||
Statutory
surplus reserve
|
3,090,320
|
3,090,320
|
||||||
Public
welfare fund
|
282,377
|
282,377
|
||||||
Total
|
3,372,697
|
3,372,697
|
Ÿ
|
Pharmaceutical
Industry Growth.
We believe the market for
pharmaceutical products in China is growing rapidly driven by China’s
economic growth, increased pharmaceutical expenditure, an aging
population, increased lifestyle-related diseases, government support of
the pharmaceutical industry, as well as the increased availability of
funding for medical insurance in China. In particular, in
January 2009, the PRC’s State Council passed a far-reaching medical reform
plan (“Health Reform”) to help provide universal primary medical insurance
coverage and increased access to medical facilities to a greater majority
of its citizens. We expect these factors to continue to drive
industry growth.
|
Ÿ
|
Production
Capacity
.
We
believe much of the pharmaceutical market in China is still underserved,
particularly with respect to treatment of depression, melancholy and nerve
regulation. In 2009 the demand for our products that treat
depression, melancholy and regulate nerves, increased and we were able to
increase our production of such products to capture much of this
growth. We believe our facilities with the ability to
manufacture 18 dosage forms and over 200 products will allow us to capture
future market growth and increase our revenue and market share
accordingly.
|
Ÿ
|
Perceptions
of Product Quality.
We believe that rising health concerns in China
have contributed to a greater demand for health-care products with
perceived health benefits. We believe many consumers in China
tend to prefer natural health care products with, we believe, limited side
effects. Accordingly, we believe our reputation for quality and
leadership position in a number of our products allow our products to
command a higher average selling price and generate higher gross margins
than our competitors.
|
Ÿ
|
Seasonality
.
Our product
sales remain seasonal, with greater demand in colder
months.
|
|
Ÿ
|
Expenses
Associated with Research and Development
.
In order to enhance
our existing products and develop new products for the market, we have
devoted significant resources to R&D.
|
Ÿ
|
Expenses
Associated with Sales and Marketing
.
In order to promote
our product brand and gain greater market awareness, we have devoted
significant resources to sales and marketing, in particular advertising
activities.
|
Three
Months Ended April 30
|
||||||||
2010
|
2009
|
|||||||
($
in thousands)
|
||||||||
Statements
of Operations Data
|
||||||||
Sales,
net
|
12,093 | 8,703 | ||||||
Cost
of goods sold
|
5,878 | 4,403 | ||||||
Gross
profit
|
6,215 | 4,300 | ||||||
Operating
and administrative expenses
|
||||||||
Sales
and marketing
|
1,265 | 1,120 | ||||||
General
and administrative
|
975 | 598 | ||||||
Research
and development
|
571 | 494 | ||||||
Other
income
|
15 | 10 | ||||||
Income
from operation before income tax expenses
|
3,419 | 2,098 | ||||||
Income
tax expenses
|
- | - | ||||||
Net
income
|
3,419 | 2,098 | ||||||
Other
comprehensive income:
|
||||||||
Cumulative
currency translation adjustments
|
(162 | ) | 79 | |||||
Total
comprehensive income
|
3,257 | 2,177 |
2010
|
2009
|
2010
over 2009
|
||||||||||||||||||||||||||||||||||
Product
name
|
Quantity
(Pack’000)
|
Amount
($’000)
|
%
of Sales
|
Quantity
(Pack’000)
|
Amount
($’000)
|
%
of Sales
|
Quantity
(Pack’000)
|
Amount
($’000)
|
%
of Sales
|
|||||||||||||||||||||||||||
Siberian
Ginseng (Acanthopanax) Series
|
76 | 5,538 | 40.7 | 88 | 5,635 | 52.5 | (12 | ) | (97 | ) | (1.7 | ) | ||||||||||||||||||||||||
Tianma
Series
|
13 | 977 | 7.2 | 13 | 974 | 9.1 | 0 | 3 | 0.3 | |||||||||||||||||||||||||||
Compound
Yangjiao Tablets
|
18 | 1,758 | 12.9 | 19 | 1,529 | 14.3 | (1 | ) | 229 | 15.0 | ||||||||||||||||||||||||||
Shark
Vital Capsules
|
1 | 655 | 4.8 | 4 | 1,634 | 15.2 | (3 | ) | (979 | ) | (59.9 | ) | ||||||||||||||||||||||||
Shengmai
Granules
|
23 | 979 | 7.2 | 25 | 953 | 8.9 | (2 | ) | 26 | 2.7 | ||||||||||||||||||||||||||
Banlangen
Granules
|
15 | 402 | 3.0 | - | - | - | 15 | 402 | 100.0 | |||||||||||||||||||||||||||
Compound
Honeysuckle Granules
|
55 | 3,289 | 24.2 | - | - | - | 55 | 3,289 | 100.0 | |||||||||||||||||||||||||||
Total
|
201 | 13,598 | 100.0 | 149 | 10,725 | 100.0 | 52 | 2,873 | 26.8 |
2010
|
2009
|
|||||||
Sales
revenues (in thousands)
|
$ | 13,598 | $ | 10,725 | ||||
Total
sales quantity (pack in thousands)
|
201 | 149 | ||||||
Average
selling prices/pack (in thousands)
|
$ | 67.65 | $ | 71.98 |
Average
Price Per Pack
|
||||||||||||
Product
|
2010
|
2009
|
Percentage
Change
|
|||||||||
Siberian
Ginseng (Acanthopanax) Series
|
$ | 72.66 | $ | 63.78 | 13.9 | |||||||
Tianma
Series
|
76.34 | 75.03 | 1.7 | |||||||||
Compound
Yangjiao Tablets
|
100.03 | 80.04 | 25.0 | |||||||||
Shark
Vital Capsules
|
461.40 | 461.46 | 0.0 | |||||||||
Shengmai
Granules
|
42.01 | 37.52 | 12.0 | |||||||||
Banlangen
Granules
|
26.01 | - | 100.0 | |||||||||
Compound
Honeysuckle Granules
|
60.02 | - | 100.0 | |||||||||
Total
|
$ | 67.65 | $ | 71.98 | (6.0 | ) |
Six
Months Ended April 30
|
||||||||
2010
|
2009
|
|||||||
($
in thousands)
|
||||||||
Statements
of Operations Data
|
||||||||
Sales,
net
|
29,225 | 22,473 | ||||||
Cost
of goods sold
|
13,530 | 10,883 | ||||||
Gross
profit
|
15,695 | 11,590 | ||||||
Operating
and administrative expenses
|
||||||||
Sales
and marketing
|
2,404 | 1,418 | ||||||
General
and administrative
|
1,792 | 1,220 | ||||||
Research
and development
|
723 | 606 | ||||||
Other
income
|
27 | 19 | ||||||
Income
from operation before income tax expenses
|
10,803 | 8,365 | ||||||
Income
tax expenses
|
- | - | ||||||
Net
income
|
10,803 | 8,365 | ||||||
Other
comprehensive income:
|
||||||||
Cumulative
currency translation adjustments
|
(160 | ) | 14 | |||||
Total
comprehensive income
|
10,643 | 8,379 |
2010
|
2009
|
2010
over 2009
|
||||||||||||||||||||||||||||||||||
Product
name
|
Quantity
(Pack’000)
|
Amount
($’000)
|
%
of Sales
|
Quantity
(Pack’000)
|
Amount
($’000)
|
%
of Sales
|
Quantity
(Pack’000)
|
Amount
($’000)
|
%
of Sales
|
|||||||||||||||||||||||||||
Siberian
Ginseng (Acanthopanax) Series
|
182 | 14,699 | 44.4 | 229 | 14,956 | 54.1 | (47 | ) | (257 | ) | (1.7 | ) | ||||||||||||||||||||||||
Tianma
Series
|
37 | 2,793 | 8.4 | 37 | 2,759 | 10.0 | 0 | 34 | 1.2 | |||||||||||||||||||||||||||
Compound
Yangjiao Tablets
|
46 | 4,180 | 12.6 | 48 | 3,857 | 13.9 | (2 | ) | 323 | 8.4 | ||||||||||||||||||||||||||
Shark
Vital Capsules
|
4 | 1,739 | 5.3 | 9 | 4,061 | 14.7 | (5 | ) | (2,322 | ) | (57.2 | ) | ||||||||||||||||||||||||
Shengmai
Granules
|
52 | 2,097 | 6.3 | 62 | 2,031 | 7.3 | (10 | ) | 66 | 3.2 | ||||||||||||||||||||||||||
Banlangen
Granules
|
36 | 941 | 2.8 | - | - | - | 36 | 941 | 100.0 | |||||||||||||||||||||||||||
Compound
Honeysuckle Granules
|
113 | 6,685 | 20.2 | - | - | - | 113 | 6,685 | 100.0 | |||||||||||||||||||||||||||
Total
|
470 | 33,134 | 100.0 | 385 | 27,664 | 100.0 | 85 | 5,470 | 19.8 |
2010
|
2009
|
|||||||
Sales
revenues (in thousands)
|
$ | 33,134 | $ | 27,664 | ||||
Total
sales quantity (pack in thousands)
|
470 | 385 | ||||||
Average
selling prices/pack (in thousands)
|
$ | 70.50 | $ | 71.85 |
Average
Price Per Pack
|
||||||||||||
Product
|
2010
|
2009
|
Percentage
Change
|
|||||||||
Siberian
Ginseng (Acanthopanax) Series
|
$ | 80.61 | $ | 65.26 | 23.5 | |||||||
Tianma
Series
|
75.60 | 75.05 | 0.7 | |||||||||
Compound
Yangjiao Tablets
|
91.13 | 80.05 | 13.8 | |||||||||
Shark
Vital Capsules
|
462.09 | 461.54 | 0.1 | |||||||||
Shengmai
Granules
|
40.37 | 32.94 | 22.6 | |||||||||
Banlangen
Granules
|
26.04 | - | 100.0 | |||||||||
Compound
Honeysuckle Granules
|
59.06 | - | 100.0 | |||||||||
Total
|
$ | 70.50 | $ | 71.85 | (2.0 | ) |
Six
months ended April 30
|
||||||||
Net
cash provided by (used in):
|
2010
|
2009
|
||||||
($
in thousands)
|
||||||||
Operating
activities
|
19,250
|
4,188
|
||||||
Investing
activities
|
(3,929)
|
(16)
|
||||||
Financing
activities
|
-
|
-
|
Exhibit
No.
|
Description
|
|
3.1
|
Restated
Articles of Incorporation
(1)
|
|
3.2
|
Second
Restated Bylaws
(1)
|
|
3.3
|
Certificate
of Amendment to Articles of Incorporation
(2)
|
|
10.1
|
Renhuang
Pharmaceuticals, Inc. 2007 Non-Qualified Company Stock Grant and Option
Plan
(3)
|
|
10.2
|
2003
Omnibus Securities Plan
(4)
|
|
10.3
|
Employment
Agreement with Yan Yi Chen
(5)
|
|
10.4
|
English
translation of Purchase Agreement for Patents dated September 1, 2009
(5)
|
|
10.5
|
English
translation of Purchase Agreement for Ah City Natural and
Biopharmaceutical Plant dated October 12, 2009
(5)
|
|
10.6
|
English
translation of Purchase Agreement with Hongxiangmingyuan of Heilongjiang
Yongtai Company dated April 10, 2010*
|
|
10.7
|
Independent
Director Agreement with Mr. Xiaoheng (Sean) Shao, dated April 13,
2010*
|
|
10.8
|
Independent
Director Agreement with Mr. Bingchun Wu, dated April 19,
2010*
|
|
10.9
|
Independent
Director Agreement with Mr. Changxiong Sun, dated April 19,
2010*
|
|
21.1
|
Subsidiaries
of the registrant
(2)
|
|
31.1
|
Certification
of Principal Executive Officer pursuant to Rules 13a-14 and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002*
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002*
|
|
32.1
|
Certification
of Principal Executive and Financial Officers pursuant to 18 U.S.C.
§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002*
|
*
|
Filed
herewith.
|
(1)
|
Incorporated
by reference from Form 8-K filed with the SEC on April 22,
2003.
|
(2)
|
Incorporated
by reference from Form 10-K filed with the SEC on February 13,
2007.
|
(3)
|
Incorporated
by reference from Form 8-K filed with the SEC on May 2,
2007.
|
(4)
|
Incorporated
by reference from Form 8-K filed with the SEC on April 22,
2003.
|
(5)
|
Incorporated
by reference from Form 10-K filed with the SEC on January 29,
2010.
|
Date: June 7, 2010 | RENHUANG PHARMACEUTICALS, INC. | ||
|
By:
|
/s/ Li Shaoming | |
Li Shaoming, Chief Executive Officer and President | |||
(Principal Executive Officer) | |||
Date:
June 7, 2010
|
By:
|
/s/ Yan Yi Chen | |
Yan Yi Chen, Chief Financial Officer | |||
(Principal Accounting and Financial Officer) | |||
I.
|
SERVICES
|
1.1
|
Board of
Directors
. Director has been appointed as an independent director
of the Company’s Board of Directors (the “Board”), effective immediately
prior to the Company’s registration statement on Form F-1 is declared
effective by the Securities and Exchange Commission, until the earlier of
the date on which Director ceases to be a member of the Board for any
reason or the date of termination of this Agreement in accordance with
Section 5.2 hereof (such earlier date being the “Expiration Date”).The
Board shall consist of Director and such other members as nominated and
elected pursuant to the then-current Memorandum and Articles of
Association of the Company (the “Memorandum and
Articles”).
|
1.2
|
Director
Services
. Director’s services to the Company hereunder shall
include services on the Board to manage the business of the Company in
accordance with applicable law and stock exchange rules as well as the
Memorandum and Articles, and such other services mutually agreed to by
Director and the Company (the “Director
Services”).
|
1.3
|
Audit
Committee Chair. You will also chair the Audit Committee of the Board, and
provide independent, effective leadership to the Committee and load the
Committee in fulfilling the duties set out in its
charter.
|
II.
|
COMPENSATION
|
2.1
|
Expense
Reimbursement
. The Company shall reimburse Director for all
reasonable travel and other out-of-pocket expenses incurred in connection
with the Director Services rendered by
Director.
|
2.2
|
Fees to
Directo
r. The Company agrees to pay Director $3,000 per month for
Board meeting attendance, net of any
withholdings.
|
2.3
|
Share Option
.
The Company agrees to grant Director an option to purchase ordinary shares
of the Company at the fair market price per share immediately upon the
signing of this agreement, with the total amount no more than 70,000
shares of option for 3 years Director Services for the
Company. The option shall vest on a quarterly basis (5,833
shares of option to vest on the first 11 quarter anniversaries of the
grant and 5,837 shares of option to vest on the 12
th
quarter anniversary of the grant; conditional upon continued service as a
Director of the Company as of each such anniversary. Further,
the option allows for cashless
exercise.
|
2.4
|
Director and Officer
Liability Insurance
. The Company will purchase a customary director
and office liability insurance policy before Director joins the Board and
such policy shall cover Director to the same extent as other directors and
officers covered under the policy.
|
III.
|
DUTIES
OF DIRECTOR
|
3.1
|
Fiduciary
Duties
. In fulfilling his managerial responsibilities, Director
shall be charged with a fiduciary duty to the Company and all of its
shareholders. Director shall be attentive and inform himself of all
material facts regarding a decision before taking action. In addition,
Director’s actions shall be motivated solely by the best interests of the
Company and its shareholders.
|
3.2
|
Confidentiality
.
During the term of this Agreement, and for a period of one (1) year after
the Expiration Date, Director shall maintain in strict confidence all
information he has obtained or shall obtain from the Company, which the
Company has designated as “confidential” or which is by its nature
confidential, relating to the Company’s business, operations, properties,
assets, services, condition (financial or otherwise), liabilities,
employee relations, customers (including customer usage statistics),
suppliers, prospects, technology, or trade secrets, except to the extent
such information (i) is in the public domain through no act or omission of
the Company, (ii) is required to be disclosed by law or a valid order by a
court or other governmental body, or (iii) is independently learned by
Director outside of this relationship (the “Confidential
Information”).
|
3.3
|
Nondisclosure and
Nonuse Obligations
. Director will use the Confidential Information
solely to perform the Director Services for the benefit of the Company.
Director will treat all Confidential Information of the Company with the
same degree of care as Director treats his own Confidential Information,
and Director will use its best efforts to protect the Confidential
Information. Director will not use the Confidential Information for his
own benefit or the benefit of any other person or entity, except as may be
specifically permitted in this Agreement. Director will immediately give
notice to the Company of any unauthorized use or disclosure by or through
him, or of which he becomes aware, of the Confidential Information.
Director agrees to assist the Company in remedying any such unauthorized
use or disclosure of the Confidential
Information.
|
3.4
|
Return of The Company
Property
. All materials furnished to Director by the Company,
whether delivered to Director by the Company or made by Director in the
performance of Director Services under this Agreement (the “Company
Property”), are the sole and exclusive property of the Company. Director
agrees to promptly deliver the original and any copies of the Company
Property to the Company at any time upon the Company’s request. Upon
termination of this Agreement by either party for any reason, Director
agrees to promptly deliver to the Company or destroy, at the Company’s
option, the original and any copies of the Company Property. Director
agrees to certify in writing that Director has so returned or destroyed
all such Company Property.
|
3.5
|
Report.
While
this Agreement is in effect, the Director shall immediately report to the
Company in the event: (1) the Director knows or has reason to know or
should have known that any of the covenants specified in Section IV hereof
is not satisfied or is not going to be satisfied; and (2) the Director
simultaneously serves on an audit committee of any other public
company.
|
IV.
|
COVENANTS
OF DIRECTOR
|
4.1
|
No Conflict of
Interest
. During the term of this Agreement, and for a period of
one (1) year after the Expiration Date, Director shall not be employed by,
own, manage, control or participate in the ownership, management,
operation or control of any business entity that is competitive with the
Company or otherwise undertake any obligation inconsistent with the terms
hereof, provided that Director may continue Director’s current affiliation
or other current relationships with the entity or entities described on
Exhibit A
(all of which entities are referred to collectively as “Current
Affiliations”). This Agreement is subject to the current terns and
agreements governing Director’s relationship with Current Affiliations,
and nothing in this Agreement is intended to be or will be construed to
inhibit or limit any of Director’s obligations to Current Affiliations.
Director represents that nothing in this Agreement conflicts with
Director’s obligations to Current Affiliations. A business entity shall be
deemed to be “competitive with the Company” for purpose of this Article IV
only if and to the extent it engages in the business substantially similar
to the Company’s insurance intermediary
business.
|
4.2
|
Noninterference with
Business.
During the term of this Agreement, and for a period of
one(1)year after the Expiration Date, Director agrees not to interfere
with the business of the Company in any manner. By way of example and not
of limitation, Director agrees not to solicit or induce any employee,
independent contractor, customer or supplier of the Company to terminate
or breach his, her or its employment, contractual or other relationship
with the Company.
|
4.3
|
Non-related
Party.
During the term of Director’s services to the Company, the
Director shall observe all applicable laws and regulations relating to
independent director of a public company as promulgated from time to time,
and shall not:
|
4.3.1
|
be
an employee of the Company or any parent company or
subsidiary;
|
4.3.2
|
accept,
directly or indirectly, any consulting, advisory, or other compensatory
fee from the Company other than the compensation for being an independent
director of the Company as agreed in this
Agreement;
|
4.3.3
|
be
an affiliated person of the Company or any parent company or
subsidiary;
|
4.3.4
|
possess
an interest in any transaction with the Company or any parent company or
subsidiary, for which disclosure would be
required;
|
4.3.5
|
be
engaged in a business relationship with the Company or any parent company
or subsidiary, for which disclosure would be
required.
|
5.1
|
Term.
This
Agreement is effective as of the date first written above and will
continue until the Expiration Date.
|
5.2
|
Termination.
Either party may terminate this Agreement at any time upon thirty
(30)days prior written notice to the other party, or such shorter period
as the parties may agree upon.
|
5.3
|
Survival.
The
rights and obligations contained in Articles III and IV will survive any
termination or expiration of this
Agreement.
|
6.1
|
Assignment.
Except
as expressly permitted by this Agreement, neither party shall assign,
delegate, or otherwise transfer any of its rights or obligations under
this Agreement without the prior written consent of the other party.
Subject to the foregoing, this Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and
assigns.
|
6.2
|
No Waiver.
The
failure of any party to insist upon the strict observance and performance
of the terms of this Agreement shall not be deemed a waiver of other
obligations hereunder, nor shall it be considered a future or continuing
waiver of the same terms.
|
6.3
|
Notices.
Any
notice required or permitted by this Agreement shall be in writing and
shall be delivered as follows with notice deemed given as
indicated: (i) by personal delivery when delivered personally;
(ii) by overnight courier upon written verification of receipt; (iii) by
facsimile transmission upon acknowledgment of receipt of electronic
transmission; or (iv) by certified or registered mail, return receipt
requested, upon verification of receipt. Notice shall be sent to the
addresses set forth on the signature page of this Agreement or such other
address as either party may specify in
writing.
|
6.4
|
Governing Law.
This Agreement shall be governed in all respects by the laws of the State
of New York, U.S.A.
|
6.5
|
Severability.
Should any provisions of this Agreement be held by a court of law to be
illegal, invalid or unenforceable, the legality, validity and
enforceability of the remaining provisions of this Agreement shall not be
affected or impaired thereby.
|
6.6
|
Entire Agreement.
This Agreement constituted the entire agreement between the parties
relating to this subject matter and supersedes all prior or
contemporaneous oral or written agreements concerning such subject matter.
The terms of this Agreement will govern all Director Services undertaken
by Director for the Company.
|
6.7
|
Amendments.
This Agreement may only be amended, modified or changed by an agreement
signed by the Company and Director. The terms contained herein may not be
altered, supplemented or interpreted by any course of dealing or
practices.
|
6.8
|
Language.
This
Agreement is made both in Chinese and English. Each language shall have
the same effect. In the event of any discrepancy between the two
languages, the English version shall
prevail.
|
6.9
|
Counterparts.
This Agreement may be executed in two counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument.
|
Renhuang Pharmaceuticals Inc. 仁皇药业公司 | Independent Director 独立董事 |
By 签字: | By 签字: |
Date 日期 : 2010 04 13 | Date 日期: |
I.
|
SERVICES
|
1.1
|
Board of
Directors
. Director has been appointed as an independent director
of the Company’s Board of Directors (the “Board”), effective immediately
prior to the Company’s registration statement on Form F-1 is declared
effective by the Securities and Exchange Commission, until the earlier of
the date on which Director ceases to be a member of the Board for any
reason or the date of termination of this Agreement in accordance with
Section 5.2 hereof (such earlier date being the “Expiration Date”). The
Board shall consist of Director and such other members as nominated and
elected pursuant to the then-current Memorandum and Articles of
Association of the Company (the “Memorandum and
Articles”).
|
1.2
|
Director
Services
. Director’s services to the Company hereunder shall
include services on the Board to manage the business of the Company in
accordance with applicable law and stock exchange rules as well as the
Memorandum and Articles, and such other services mutually agreed to by
Director and the Company (the “Director
Services”).
|
1.3
|
Audit
Committee Member. You will be the member the Audit Committee of the Board,
and provide independent, effective advices to the Committee and assist the
Committee in fulfilling the duties set out in its
charter.
|
II.
|
COMPENSATION
|
2.1
|
Expense
Reimbursement
. The Company shall reimburse Director for all
reasonable travel and other out-of-pocket expenses incurred in connection
with the Director Services rendered by
Director.
|
|
2.2
|
Fees to
Directo
r. The Company agrees to pay Director RMB3,000 per month for
Board meeting attendance.
|
2.3
|
Director and Officer
Liability Insurance
. The Company will purchase a customary director
and office liability insurance policy before Director joins the Board and
such policy shall cover Director to the same extent as other directors and
officers covered under the
policy.
|
III.
|
DUTIES
OF DIRECTOR
|
3.1
|
Fiduciary
Duties
. In fulfilling his managerial responsibilities, Director
shall be charged with a fiduciary duty to the Company and all of its
shareholders. Director shall be attentive and inform himself of all
material facts regarding a decision before taking action. In addition,
Director’s actions shall be motivated solely by the best interests of the
Company and its shareholders.
|
3.2
|
Confidentiality
.
During the term of this Agreement, and for a period of one (1) year after
the Expiration Date, Director shall maintain in strict confidence all
information he has obtained or shall obtain from the Company, which the
Company has designated as “confidential” or which is by its nature
confidential, relating to the Company’s business, operations, properties,
assets, services, condition(financial or otherwise), liabilities, employee
relations, customers (including customer usage statistics), suppliers,
prospects, technology, or trade secrets, except to the extent such
information (i) is in the public domain through no act or omission of the
Company, (ii) is required to be disclosed by law or a valid order by a
court or other governmental body, or (iii) is independently learned by
Director outside of this relationship (the “Confidential
Information”).
|
3.3
|
Nondisclosure and
Nonuse Obligations
. Director will use the Confidential Information
solely to perform the Director Services for the benefit of the Company.
Director will treat all Confidential Information of the Company with the
same degree of care as Director treats his own Confidential Information,
and Director will use its best efforts to protect the Confidential
Information. Director will not use the Confidential Information for his
own benefit or the benefit of any other person or entity, except as may be
specifically permitted in this Agreement. Director will immediately give
notice to the Company of any unauthorized use or disclosure by or through
him, or of which he becomes aware, of the Confidential Information.
Director agrees to assist the Company in remedying any such unauthorized
use or disclosure of the Confidential
Information.
|
3.4
|
Return of The Company
Property
. All materials furnished to Director by the Company,
whether delivered to Director by the Company or made by Director in the
performance of Director Services under this Agreement (the “Company
Property”), are the sole and exclusive property of the Company. Director
agrees to promptly deliver the original and any copies of the Company
Property to the Company at any time upon the Company’s request. Upon
termination of this Agreement by either party for any reason, Director
agrees to promptly deliver to the Company or destroy, at the Company’s
option, the original and any copies of the Company Property. Director
agrees to certify in writing that Director has so returned or destroyed
all such Company Property.
|
3.5
|
Report.
While
this Agreement is in effect, the Director shall immediately report to the
Company in the event: (1) the Director knows or has reason to know or
should have known that any of the covenants specified in Section IV hereof
is not satisfied or is not going to be satisfied; and (2) the Director
simultaneously serves on an audit committee of any other public
company.
|
IV.
|
COVENANTS
OF DIRECTOR
|
4.1
|
No Conflict of
Interest
. During the term of this Agreement, and for a period of
one (1) year after the Expiration Date, Director shall not be employed by,
own, manage, control or participate in the ownership, management,
operation or control of any business entity that is competitive with the
Company or otherwise undertake any obligation inconsistent with the terms
hereof, provided that Director may continue Director’s current affiliation
or other current relationships with the entity or entities described on
Exhibit A
(all of which entities are referred to collectively as “Current
Affiliations”). This Agreement is subject to the current terns and
agreements governing Director’s relationship with Current Affiliations,
and nothing in this Agreement is intended to be or will be construed to
inhibit or limit any of Director’s obligations to Current Affiliations.
Director represents that nothing in this Agreement conflicts with
Director’s obligations to Current Affiliations. A business entity shall be
deemed to be “competitive with the Company” for purpose of this Article IV
only if and to the extent it engages in the business substantially similar
to the Company’s insurance intermediary
business.
|
4.2
|
Noninterference with
Business.
During the term of this Agreement, and for a period of
one (1) year after the Expiration Date, Director agrees not to interfere
with the business of the Company in any manner. By way of example and not
of limitation, Director agrees not to solicit or induce any employee,
independent contractor, customer or supplier of the Company to terminate
or breach his, her or its employment, contractual or other relationship
with the Company.
|
4.3
|
Non-related
Party.
During the term of Director’s services to the Company, the
Director shall observe all applicable laws and regulations relating to
independent director of a public company as promulgated from time to time,
and shall not:
|
4.3.1
|
be
an employee of the Company or any parent company or
subsidiary;
|
4.3.2
|
accept,
directly or indirectly, any consulting, advisory, or other compensatory
fee from the Company other than the compensation for being an independent
director of the Company as agreed in this
Agreement;
|
4.3.3
|
be
an affiliated person of the Company or any parent company or
subsidiary;
|
4.3.4
|
possess
an interest in any transaction with the Company or any parent company or
subsidiary, for which disclosure would be
required;
|
4.3.5
|
be
engaged in a business relationship with the Company or any parent company
or subsidiary, for which disclosure would be
required.
|
V.
|
TERM
AND TERMINATION
|
5.1
|
Term.
This
Agreement is effective as of the date first written above and will
continue until the Expiration
Date.
|
5.2
|
Termination.
Either party may terminate this Agreement at any time upon thirty
(30)days prior written notice to the other party, or such shorter period
as the parties may agree
upon.
|
5.3
|
Survival.
The
rights and obligations contained in Articles III and IV will survive any
termination or expiration of this
Agreement.
|
VI.
|
MISCELLANEOUS
|
6.1
|
Assignment.
Except
as expressly permitted by this Agreement, neither party shall assign,
delegate, or otherwise transfer any of its rights or obligations under
this Agreement without the prior written consent of the other party.
Subject to the foregoing, this Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and
assigns.
|
6.2
|
No Waiver.
The
failure of any party to insist upon the strict observance and performance
of the terms of this Agreement shall not be deemed a waiver of other
obligations hereunder, nor shall it be considered a future or continuing
waiver of the same terms.
|
6.3
|
Notices.
Any
notice required or permitted by this Agreement shall be in writing and
shall be delivered as follows with notice deemed given as
indicated: (i) by personal delivery when delivered personally; (ii)
by overnight courier upon written verification of receipt; (iii) by
facsimile transmission upon acknowledgment of receipt of electronic
transmission; or (iv) by certified or registered mail, return receipt
requested, upon verification of receipt. Notice shall be sent to the
addresses set forth on the signature page of this Agreement or such other
address as either party may specify in
writing.
|
6.4
|
Governing Law.
This Agreement shall be governed in all respects by the laws of the State
of New York, U.S.A.
|
6.5
|
Severability.
Should any provisions of this Agreement be held by a court of law to be
illegal, invalid or unenforceable, the legality, validity and
enforceability of the remaining provisions of this Agreement shall not be
affected or impaired thereby.
|
6.6
|
Entire Agreement.
This Agreement constituted the entire agreement between the parties
relating to this subject matter and supersedes all prior or
contemporaneous oral or written agreements concerning such subject matter.
The terms of this Agreement will govern all Director Services undertaken
by Director for the Company.
|
6.7
|
Amendments.
This Agreement may only be amended, modified or changed by an agreement
signed by the Company and Director. The terms contained herein may not be
altered, supplemented or interpreted by any course of dealing or
practices.
|
6.8
|
Language.
This
Agreement is made both in Chinese and English. Each language shall have
the same effect. In the event of any discrepancy between the two
languages, the English version shall
prevail.
|
6.9
|
Counterparts.
This Agreement may be executed in two counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument.
|
Renhuang
Pharmaceuticals Inc.
仁皇药业公司
|
Independent
Director
独立董事
|
|||
By
签字:
|
By
签字:
|
|||
Date
日期
:
|
2010
04 19
|
Date
日期:
|
I.
|
SERVICES
|
1.1
|
Board of
Directors
. Director has been appointed as an independent director
of the Company’s Board of Directors (the “Board”), effective immediately
prior to the Company’s registration statement on Form F-1 is declared
effective by the Securities and Exchange Commission, until the earlier of
the date on which Director ceases to be a member of the Board for any
reason or the date of termination of this Agreement in accordance with
Section 5.2 hereof (such earlier date being the “Expiration Date”).The
Board shall consist of Director and such other members as nominated and
elected pursuant to the then-current Memorandum and Articles of
Association of the Company(the “Memorandum and
Articles”).
|
1.2
|
Director
Services
. Director’s services to the Company hereunder shall
include services on the Board to manage the business of the Company in
accordance with applicable law and stock exchange rules as well as the
Memorandum and Articles, and such other services mutually agreed to by
Director and the Company (the “Director
Services”).
|
1.3
|
Audit
Committee Member. You will be the member the Audit Committee of the Board,
and provide independent, effective advices to the Committee and assist the
Committee in fulfilling the duties set out in its
charter.
|
II.
|
COMPENSATION
|
2.1
|
Expense
Reimbursement
. The Company shall reimburse Director for all
reasonable travel and other out-of-pocket expenses incurred in connection
with the Director Services rendered by
Director.
|
|
2.2
|
Fees to
Directo
r. The Company agrees to pay Director RMB3,000 per month for
Board meeting attendance.
|
2.3
|
Director and Officer
Liability Insurance
. The Company will purchase a customary director
and office liability insurance policy before Director joins the Board and
such policy shall cover Director to the same extent as other directors and
officers covered under the
policy.
|
III.
|
DUTIES
OF DIRECTOR
|
3.1
|
Fiduciary
Duties
. In fulfilling his managerial responsibilities, Director
shall be charged with a fiduciary duty to the Company and all of its
shareholders. Director shall be attentive and inform himself of all
material facts regarding a decision before taking action. In addition,
Director’s actions shall be motivated solely by the best interests of the
Company and its shareholders.
|
3.2
|
Confidentiality
.
During the term of this Agreement, and for a period of one (1) year after
the Expiration Date, Director shall maintain in strict confidence all
information he has obtained or shall obtain from the Company, which the
Company has designated as “confidential” or which is by its nature
confidential, relating to the Company’s business, operations, properties,
assets, services, condition(financial or otherwise), liabilities, employee
relations, customers(including customer usage statistics), suppliers,
prospects, technology, or trade secrets, except to the extent such
information (i) is in the public domain through no act or omission of the
Company, (ii) is required to be disclosed by law or a valid order by a
court or other governmental body, or (iii) is independently learned by
Director outside of this relationship(the “Confidential
Information”).
|
3.3
|
Nondisclosure and
Nonuse Obligations
. Director will use the Confidential Information
solely to perform the Director Services for the benefit of the Company.
Director will treat all Confidential Information of the Company with the
same degree of care as Director treats his own Confidential Information,
and Director will use its best efforts to protect the Confidential
Information. Director will not use the Confidential Information for his
own benefit or the benefit of any other person or entity, except as may be
specifically permitted in this Agreement. Director will immediately give
notice to the Company of any unauthorized use or disclosure by or through
him, or of which he becomes aware, of the Confidential Information.
Director agrees to assist the Company in remedying any such unauthorized
use or disclosure of the Confidential
Information.
|
3.4
|
Return of The Company
Property
. All materials furnished to Director by the Company,
whether delivered to Director by the Company or made by Director in the
performance of Director Services under this Agreement (the “Company
Property”), are the sole and exclusive property of the Company. Director
agrees to promptly deliver the original and any copies of the Company
Property to the Company at any time upon the Company’s request. Upon
termination of this Agreement by either party for any reason, Director
agrees to promptly deliver to the Company or destroy, at the Company’s
option, the original and any copies of the Company Property. Director
agrees to certify in writing that Director has so returned or destroyed
all such Company Property.
|
3.5
|
Report.
While
this Agreement is in effect, the Director shall immediately report to the
Company in the event: (1) the Director knows or has reason to know or
should have known that any of the covenants specified in Section IV hereof
is not satisfied or is not going to be satisfied; and (2) the Director
simultaneously serves on an audit committee of any other public
company.
|
IV.
|
COVENANTS
OF DIRECTOR
|
4.1
|
No Conflict of
Interest
. During the term of this Agreement, and for a period of
one (1) year after the Expiration Date, Director shall not be employed by,
own, manage, control or participate in the ownership, management,
operation or control of any business entity that is competitive with the
Company or otherwise undertake any obligation inconsistent with the terms
hereof, provided that Director may continue Director’s current affiliation
or other current relationships with the entity or entities described on
Exhibit A
(all of which entities are referred to collectively as “Current
Affiliations”). This Agreement is subject to the current terns and
agreements governing Director’s relationship with Current Affiliations,
and nothing in this Agreement is intended to be or will be construed to
inhibit or limit any of Director’s obligations to Current Affiliations.
Director represents that nothing in this Agreement conflicts with
Director’s obligations to Current Affiliations. A business entity shall be
deemed to be “competitive with the Company” for purpose of this Article IV
only if and to the extent it engages in the business substantially similar
to the Company’s insurance intermediary
business.
|
4.2
|
Noninterference with
Business.
During the term of this Agreement, and for a period of
one (1) year after the Expiration Date, Director agrees not to interfere
with the business of the Company in any manner. By way of example and not
of limitation, Director agrees not to solicit or induce any employee,
independent contractor, customer or supplier of the Company to terminate
or breach his, her or its employment, contractual or other relationship
with the Company.
|
4.3
|
Non-related
Party.
During the term of Director’s services to the Company, the
Director shall observe all applicable laws and regulations relating to
independent director of a public company as promulgated from time to time,
and shall not:
|
4.3.1
|
be
an employee of the Company or any parent company or
subsidiary;
|
4.3.2
|
accept,
directly or indirectly, any consulting, advisory, or other compensatory
fee from the Company other than the compensation for being an independent
director of the Company as agreed in this
Agreement;
|
4.3.3
|
be
an affiliated person of the Company or any parent company or
subsidiary;
|
4.3.4
|
possess
an interest in any transaction with the Company or any parent company or
subsidiary, for which disclosure would be
required;
|
4.3.5
|
be
engaged in a business relationship with the Company or any parent company
or subsidiary, for which disclosure would be
required.
|
V.
|
TERM
AND TERMINATION
|
5.1
|
Term.
This
Agreement is effective as of the date first written above and will
continue until the Expiration
Date.
|
5.2
|
Termination.
Either party may terminate this Agreement at any time upon thirty
(30)days prior written notice to the other party, or such shorter period
as the parties may agree
upon.
|
5.3
|
Survival.
The
rights and obligations contained in Articles III and IV will survive any
termination or expiration of this
Agreement.
|
VI.
|
MISCELLANEOUS
|
6.1
|
Assignment.
Except
as expressly permitted by this Agreement, neither party shall assign,
delegate, or otherwise transfer any of its rights or obligations under
this Agreement without the prior written consent of the other party.
Subject to the foregoing, this Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and
assigns.
|
6.2
|
No Waiver.
The
failure of any party to insist upon the strict observance and performance
of the terms of this Agreement shall not be deemed a waiver of other
obligations hereunder, nor shall it be considered a future or continuing
waiver of the same terms.
|
6.3
|
Notices.
Any
notice required or permitted by this Agreement shall be in writing and
shall be delivered as follows with notice deemed given as
indicated: (i) by personal delivery when delivered personally; (ii)
by overnight courier upon written verification of receipt; (iii) by
facsimile transmission upon acknowledgment of receipt of electronic
transmission; or (iv) by certified or registered mail, return receipt
requested, upon verification of receipt. Notice shall be sent to the
addresses set forth on the signature page of this Agreement or such other
address as either party may specify in
writing.
|
6.4
|
Governing Law.
This Agreement shall be governed in all respects by the laws of the State
of New York, U.S.A.
|
6.5
|
Severability.
Should any provisions of this Agreement be held by a court of law to be
illegal, invalid or unenforceable, the legality, validity and
enforceability of the remaining provisions of this Agreement shall not be
affected or impaired thereby.
|
6.6
|
Entire Agreement.
This Agreement constituted the entire agreement between the parties
relating to this subject matter and supersedes all prior or
contemporaneous oral or written agreements concerning such subject matter.
The terms of this Agreement will govern all Director Services undertaken
by Director for the Company.
|
6.7
|
Amendments.
This Agreement may only be amended, modified or changed by an agreement
signed by the Company and Director. The terms contained herein may not be
altered, supplemented or interpreted by any course of dealing or
practices.
|
6.8
|
Language.
This
Agreement is made both in Chinese and English. Each language shall have
the same effect. In the event of any discrepancy between the two
languages, the English version shall
prevail.
|
6.9
|
Counterparts.
This Agreement may be executed in two counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument.
|
Renhuang
Pharmaceuticals Inc.
仁皇药业公司
|
Independent
Director
独立董事
|
|||
By
签字:
|
By
签字:
|
|||
Date
日期
:
|
2010
04 19
|
Date
日期:
|
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of Renhuang
Pharmaceutical, Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this
report;
|
4.
|
The
Registrant’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the Registrant and
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared; and
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
evaluated
the effectiveness of the Registrant’s disclosure controls and procedures
and presented in this report our conclusion about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation;
and
|
|
d)
|
disclosed
in this report any change in the Registrant’s internal control over
financial reporting that occurred during the Registrant’s most recent
fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the Registrant’s internal control over financial
reporting;
|
5.
|
The
Registrant’s other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the Registrant’s auditors and the audit committee of Registrant’s board of
directors (or persons performing the equivalent
functions):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant’s internal control
over financial reporting.
|
Date:
June 7, 2010
|
|
/s/ Li Shaoming | |
Li Shaoming | |||
Chief Executive Officer and President | |||
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of Renhuang
Pharmaceutical, Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this
report;
|
4.
|
The
Registrant’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the Registrant and
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared; and
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
evaluated
the effectiveness of the Registrant’s disclosure controls and procedures
and presented in this report our conclusion about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation;
and
|
|
d)
|
disclosed
in this report any change in the Registrant’s internal control over
financial reporting that occurred during the Registrant’s most recent
fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the Registrant’s internal control over financial
reporting;
|
5.
|
The
Registrant’s other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the Registrant’s auditors and the audit committee of Registrant’s board of
directors (or persons performing the equivalent
functions):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant’s internal control
over financial reporting.
|
Date:
June 7, 2010
|
/s/ Yan Yi Chen | ||
Yan Yi Chen | |||
Chief Financial Officer | |||
(1)
|
The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Registrant.
|
Date:
June 7, 2010
|
|
/s/ Li Shaoming | |
Li Shaoming | |||
Chief Executive Officer and President | |||
(1)
|
The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Registrant.
|
Date:
June 7, 2010
|
/s/ Yan Yi Chen | ||
Yan Yi Chen | |||
Chief Financial Officer | |||